This article first appeared on GuruFocus .
Release Date: October 29, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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Revenue grew 27.4% YoY to INR 3,005 crores in Q3 2026, with double-digit growth across all business segments.
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EBITDA margin stood at 18.7%, with EBITDA improving 9.4% QoQ and 18% YoY despite input cost pressures.
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Export business surged 46.3% YoY, driven by strong demand from Europe and Asia Pacific, and now contributes 17% of total revenue.
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New business wins in automotive and industrial segments, including lash adjusters, clutch portfolios, and bearings, secure future revenue growth.
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Localization efforts progressing well, with target increased to 85%, which is expected to reduce low-margin traded goods and improve profitability.
Negative Points
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EBITDA margin declined sequentially from 19.1% to 18.7% due to increased input costs and volatility from the West Asia crisis.
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Profit after tax margin dropped to 12.3% from 12.6% QoQ, impacted by working capital increases and pricing recovery challenges.
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Free cash flow plummeted to INR 41 crores in Q3, significantly lower than the preceding quarter, due to working capital buildup.
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Working capital as a percentage of sales rose to 19%, with inventory buildup in e-mobility and delays in customer price recoveries.
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Industrial automation segment remains small at 3% of revenue, and actuators are still imported, limiting competitiveness in that high-growth sector.
Q & A Highlights
Q: What percentage of the cumulative input cost inflation has been recovered so far, and what is the outlook for further recovery in Q4? A: The input cost inflation is approximately 1% to 1.1% of quarterly sales. About 50% of this has already been recovered, while the remaining 50% is under negotiation with customers. Historically, the company has recovered 80% to 85% of such price increases, and management is confident the sales team will succeed again this time. (CFO)
Q: What is driving the sharp 46% year-on-year growth in exports, and is this quarterly run rate of over INR 500 crores sustainable? A: The export growth is primarily driven by the industrial sector, specifically bearings, with Europe accounting for about 45% of exports and Asia Pacific about 35%. The company also noted that Q3 typically sees a spike because the group closes billing around December 20. However, the Q4 run rate is expected to be slightly lower than Q3 due to the 90-day frozen order period, so the current level should not be treated as a permanent baseline. (CFO)
Q: What is the reason for the inventory buildup, particularly in the e-mobility business, and when will it normalize? A: The inventory increase was largely unplanned and driven by a sharper-than-expected rise in e-mobility demand for Q3 and Q4. Inventories were built up to meet that demand and to safeguard operations amid logistical challenges from the West Asia situation, with plants running at full capacity utilization. Most of this inventory is expected to be sold by December, leading to a correction. (CFO and Management)
Q: Why did mobility segment margins decline while industrial segment margins improved, despite raw material inflation? A: The mobility segment was less impacted by input price increases than the industrial business and has also recovered a larger portion of the cost increase through pricing. However, mobility margins were pressured by an adverse sales mix, including e-mobility development costs and newer products, which carry higher costs than conventional products. (CFO)
Q: How long does it take to recover input cost inflation through pricing, and is the recovery retrospective or prospective? A: Cost inflation recovery typically takes about four to six months, and the recovery is mostly retrospective. Negotiations with customers are ongoing, and the company expects to recover 80% to 85% of the inflation-driven margin erosion. (CFO)
Q: How large is the industrial automation business within the industrial solutions segment, and are actuators manufactured locally or imported? A: Industrial automation currently accounts for only about 3% of the India business, but it is seen as a high-potential sector, especially in machine tools, robotics, and humanoids. Bearings for this segment are locally manufactured, but rotary and linear actuators are still imported. Local production will depend on achieving economies of scale. (Management)
Q: Which end markets drove the double-digit growth in the industrial solutions segment? A: Growth was led by core industrial sectors such as metals, steel, and cement, along with strong momentum in wind energy and industrial distribution. Railways remains tender-based and can fluctuate quarter to quarter. (Management and CFO)
Q: What is the status of localization, and will the purchase of traded goods as a percentage of revenue decline going forward? A: Localization is already close to 80%, and the company has raised its target to 85%. Traded goods are currently below 20% of revenue, and the intention is to reduce this further because traded goods carry lower margins due to customs duties and freight costs. (CFO and Management)
Q: Is there any plan to merge the acquired Schaeffler India entity (Teco India) into the listed company, and could the two entities compete? A: There is no plan or discussion at present to merge Teco India with Schaeffler India Ltd. Management clarified that the products are complementary rather than competing, and Schaeffler India already offers the combined portfolio to customers. The parent company operates as one entity globally, but the Indian listed structure remains separate for now. (CFO and Management)
Q: What is the rationale behind the parent company's intent to reduce its stake, and how much will it sell? A: The promoter has expressed an intent to reduce its shareholding to about two-thirds, or roughly 67% to 68%, from around 75%, which would still retain significant control. The company stated that it does not have exact details on the number of shares or percentage, and the disclosure was made as a governance matter. (CFO and Management)
Q: How is the automotive technology segment expected to perform now that the GST cut will be in the base from October onward? A: Management expects the GST cut to continue supporting automotive demand well into 2027, at least for some quarters, based on discussions with customers. However, the exact growth rate is difficult to predict, and visibility beyond that is limited. (Management)
Q: What is the CapEx outlook for CY2027 and CY2028, and can you share the breakup of current CapEx? A: The company expects to realize the INR 500 crore CapEx guidance shortly. For CY2027 and CY2028, CapEx is expected to average close to the current level and may be slightly higher, but exact numbers are not yet finalized as budgets are still under preparation. The breakup of CapEx across specific projects cannot be shared. (CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
